Zero Knowledge privacy startup lands $30m funding

Starkware Industries, the Isreali startup founded by Prof. Eli Ben-Sasson (Technion) and Prof. Alessandro Chiesa (UC Berkeley), announced a $30m Series A round. That follows a $6m seed round just six months ago.

The funding was led by Paradigm, a new venture capital fund started by Coinbase founder Fred Ehrsham and ex-Sequoia Capital partner, Matt Huang who joins the Starkware board. Other investors include Intel Capital, Sequoia, Consensys, Coinbase Ventures, and Multicoin Capital.

Starkware has developed the next generation of zero-knowledge proofs (ZKP). ZKP enables privacy by allowing a third party to find a characteristic of the data without seeing the data. For example, a company can verify a person is over 18 without knowing their age.

zk-SNARKS is the version of ZKP that’s popular in the blockchain world and was also developed by Ben-Sasson, Chiesa, and others. zk-SNARKS is used in ZCash and it’s also available in Ethereum. One of the SNARKS drawbacks is it requires a trusted setup. If people involved in the initial configuration collude and don’t destroy the data used, then the privacy is undermined. Another issue is that SNARKS are computationally expensive.

The Starkware team produced the next generation of ZKP called zk-STARKS which is more efficient and doesn’t require a trusted setup.

Scaling as well

And Starkware is leveraging zk-STARKS beyond pure privacy applications. Their website states that they’re working on increased transaction throughput and off-chain computation, but doesn’t provides any details.

On (public) blockchains generally, when a transaction happens, all nodes execute a smart contract to verify an answer. It’s widely known that Bitcoin and Ethereum have very slow transaction rates. One scaling solution is a Layer 2 protocol like Lightning which enables transactions to occur off-chain.

Another alternative to all the nodes verifying transactions on-chain, is instead for the transaction verification to happen off-chain and to keep a zero-knowledge proof of it on the main chain. (Credit: snark.network).

In addition to Layer 2 scaling there’s also the possibility of optimizing the main chain or on-chain data scaling. For now, blockchains store every single transaction since they started. One suggestion is to convert blocks into zero-knowledge proofs and save those instead.

“Possibilities include using new ZKP techniques such as zk-STARKS to compress large numbers of transactions (e.g. 1M transactions) into a single proof (e.g. a 1-MB string), and then recursively compress a million such proofs into a 1-MB string, and then have global network consensus on that. This would yield a capacity of up to a trillion transactions per consensus-period. But there are a whole lot of questions about whether it would be possible at all or whether it would come with other trade-offs that are unacceptable.”

Novel business model

When Starkware unveiled as a company, they also announced an unusual business model. Rather than a conventional license, they adopted Tech 4 Tokens where startups pay them in tokens instead of fees.

In August last year, Technion University in Israel ran a cryptocurrency event organised by Ben-Sasson that featured many crypto luminaries including Ethereum co-founder Vitalik Buterin, Zooko Wilcox, Arthur Breitman from Tezos, and numerous academics from around the world. Ben-Sasson presented on ZKP and the pending release of zk-Starks. For the talk, Vitalik moved to a seat directly in front of Ben-Sasson and peppered the professor with questions. It was awesome to see the enthusiastic intellect in action, and Buterin followed it up with a series of posts about ZKP.